Method and system for financing home ownership

Abstract

A method and system of financing real estate ownership involving forming a title holder entity to own equity in each property, forming a pooling entity to own most of the title holding entity, the pooling entity owned by the general public directly or through equity pools, screening applicants to determine financial suitability, the title holder selling shares of a class of stock unique to a particular applicant for each property, the particular applicant having sole use and enjoyment of the property and being an owner / occupant, the sale price between 1% and 5% of market value plus underwriting fees, each applicant paying rent to the title holder entity in exchange for additional shares, the title holder entity issuing cash dividends to the general public in an amount of the rent less management fees. Each applicant's shares are held by the title holder entity as rent security.

Description

FIELD OF THE INVENTION [0001] The field of this invention is investment vehicles, and more particularly, methods and systems for financing home ownership. BACKGROUND OF THE INVENTION AND DISCUSSION OF THE PRIOR ART [0002] Many potential homeowners or those relocating from one home to another have difficulty obtaining affordable long-term home financing because of either sub-par credit ratings or the lack of a credit history. Furthermore, given recent increases in real estate values, many individuals cannot afford a minimum down payment of 20% that most banks require for conventional financing. If an individual can afford a 5% down payment, he / she is usually penalized by having to pay for private mortgage insurance and higher interest rates or bears the long-term risk of higher interest rates on an adjustable rate mortgage. [0003] The present invention is also designed to overcome disadvantages of investments of the prior art. For instance, on the one hand, people can currently inves...

AI Technical Summary

Benefits of technology

"The present invention is a method and system for financing individual residential real estate ownership without incurring significant transaction costs. It allows for the formation of a title holder entity to own equity in each property, with a pooling entity owned by the general public. The applicant sells shares of a class of stock unique to the property to the title holder, who in turn sells the shares to the general public. The applicant becomes an owner / occupant and the sale price is typically between 1% and 5% of the property's market value plus underwriting fees. The system has several advantages, including avoiding typical transaction costs, providing a tax advantage, allowing for affordable long-term home financing, and providing an investment vehicle for the public. It also allows for control over the residential real estate property with as little as 1% of the ownership and manipulation of debt-to-equity ratios as financial conditions change."

Problems solved by technology

Many potential homeowners or those relocating from one home to another have difficulty obtaining affordable long-term home financing because of either sub-par credit ratings or the lack of a credit history.

Furthermore, given recent increases in real estate values, many individuals cannot afford a minimum down payment of 20% that most banks require for conventional financing.

If an individual can afford a 5% down payment, he / she is usually penalized by having to pay for private mortgage insurance and higher interest rates or bears the long-term risk of higher interest rates on an adjustable rate mortgage.

The general risks associated with GNMA's relate to moves in long-term interest rates and an investors time horizon.

However, capital gains may not be realized to a certain extent because of the risk that many mortgages will be prepaid when homeowners refinance.

Images